The Following Information Comes from the Records of Magno Co

question 208

Essay

The following information comes from the records of Magno Co. for the current period.
a. Compute the overhead controllable and volume variances. In each case, state whether the variance is favorable or unfavorable.
b. Prepare the journal entries to charge overhead costs to work in process and the overhead variances to their proper accounts.
$\begin{array}{ll}\text { Actual costs and quantities: }\\ \text { Direct materials used} & 38,000 \text { feet @ } \$ 6.20 \text { per foot } \\ \text { Direct labor hours used } & 50,660 \text { hours } \\ \text { Direct labor rate per hour } & \$ 16 \\\text { Factory overhead } & \$ 211,600 \\25,000 \text { units were produced during the period. }\end{array}$

$\text { Standard costs and quantities per unit: }$
$\begin{array}{llr} \text { Direct materials } &\text {1.5 ft. @ \$6.10 per ft.}\\ \text {Direct labor } &\text {2 hours@\$17per hour}\\\end{array}$

Factory overhead (based on budgeted production of 24,500 units)
Variable overhead $\$ 2.25$ /direct labor hour
Fixed overhead $\$ 1.95 /$ direct labor hour

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Definitions:

$100,000 Bond

A debt instrument issued by a corporation or government entity, with a principal amount of $100,000, to raise funds from investors.

Premium

An amount paid in addition to a standard price or rate, or the amount above par value for a security.

Bond Interest Expense

The cost incurred by an issuer of bonds for the interest payments made to bondholders over a period.

Amortization

The process of spreading out a loan into a series of fixed payments over time or the gradual writing off of the initial cost of an intangible asset.